The SJSU stadium deal: Wrapping up loose ends

(Note: A version of this blog was posted for a few minutes earlier this evening. It was taken down because of a technical problem that forced me to rewrite.)

It has been four days since San Jose State ended its negotiations to build a stadium with Lew Wolff and three days since I opined that the deal was a bad one for SJSU.

And guess what: I have become convinced that the deal was even worse for SJSU than I thought late last week.

To the soccer folks who believe the deal was truly a win-win for everyone: I disagree. Strongly.

That’s not to say Wolff was negotiating in bad faith. It’s just that what was best for him was not best for SJSU, and that’s how these things go.

Generally speaking, how can $1 million annually be fair compensation for $80 million worth of land over decades and decades? It can’t.

Now, let’s try to address some lingering stadium issues…

*** Were the financial figures accurate?

To me, this is the most important issue of all, by far.

Several soccer supporters, on the Hotline and via email, have questioned the validity of the figures used in our reports — that Kassing wanted $6 million annually and that Wolff offered $1 million annually, plus a split of future revenue.

They said that those figures came from SJSU and were not representative of Wolff’s offer. They said that I hunted around until I found numbers to support my argument.

Wrong on both counts.

We ran the numbers past sources close to both Kassing and Wolff , and no one refuted them.

That’s not to say figures are 100 percent accurate, which is why we used the words “approximately” and “about” in our reports.

But I guarantee that the numbers are very close to the actual dollars discussed. And it was only after learning of the numbers that I formed my opinion.

*** Was it a lease or a sale?

Technically, it was a lease, and Wolff would have paid SJSU “rent.”

Nowhere in last week’s blog does it say that SJSU was going to sell the land, but I should have been more specific and can see why there might have been some confusion. My bad.

The phrase I used multiple times (“hand over to”) was meant in an operational way — that SJSU would hand over operational control of the land to Wolff.

And in this case operational control meant control of the revenue.

*** What were the terms of the lease?

We don’t know, because Kassing and Wolff didn’t get that far in their discussions.

I used 80 years as an example in my Hotline post, but that was an exaggeration to make my point. In reality, the lease probably would have been at least 20 years and most likely 30, which is the standard length for stadiums.

I’m going to assume Wolff would have wanted 30.

*** Does a lease (as opposed to a sale) change the equation?

Absolutely not, and here’s why:

A lease would prohibit SJSU from generating revenue from the land over and above the rent payment. Wolff would operate the 40 or so acres and pocket the cash from it.

Think of it from this perspective: The university would not have control of — nor could it sell — approximately $80 million of land for the next 30 years.

As from the rent money, it would be worth zippo to SJSU next year, zippo to SJSU in 10 years — when it would be worth, what, $150 million? — and zippo to SJSU in 30 years.

Only in Year 31 would the university possess the real value of the land.

That’s a long time to wait, a long time to pocket a paltry $1 million annually and a long time to be prohibited from selling all/part of the land.

I know, I know. SJSU isn’t making a dime off some of the acreage right now. But it has value because it can be sold.

Under Wolff’s control, unable to be sold, the same land is essentially worthless to the university.

As Kassing told me Monday: “We felt strongly that this was a commercial opportunity on our land, and we wanted to get a return on that.”

SJSU calculated a fair value for the use of all that land over all that time to be $6 million annually. Wolff disagreed, and so negotiations broke off.

*** What’s next for Spartan Stadium?

My guess is that Kassing and athletic director Tom Bowen have a Plan B in mind, and that it involves selling off some land on South Campus.

The revenue from the sale could be used to upgrade the stadium.

More questions? Bring ’em on, and I’ll do my best to get some answers.

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Hey why doesn’t Wolff talk to SJ officials about expanding PAL stadium? He could make that place pretty intimate with 15K seats which is what he wants…intimacy and very limited seats.

Earthshaker

Sierra,

I don’t disagree with your opinion that SJSU was treading water on any stadium upgrades while the Wolff proposal was on the table. I just couldn’t figure out why CVSpartan felt that soccer fans hadn’t done anything financially to get a stadium built. The mere existence of us fans produced a billionaire who was willing to build a brand new stadium on the South Campus.

206 Hoops

“Wilner, you’re no Ludwig von Mises”….

Harold, you made my day with that one — nice

ebayben

Have to admit that from the 1990s to about 2005 the Spartan football program was in a steady state of decline. For this period, the digs by the soccer types are legit. However, post 2005 Kassing and the new SJS athletic administration elevated the atheltic department’s business “IQ” and savvy. To date, they have not mis-stepped. I believe time will prove that they did not mis-step with this stadium decision also.

I am confident that Spartan football will survive and I do hope the Quakes find a way back to San Jose. But for both, it will be done on their own.

JazzyJ

Jon, your latest article on this subject, the one printed yesterday in the paper, is highly disturbing. It’s just irresponsible journalism. It seems that you are moving the goalposts around to bolster your case. In your first blog entry on this topic, from a week or so ago, it was $1 million + a share of revenue for about 40 acres. Now it’s $1 million, no mention of revenue share under Wolff’s plan, and now as much as 65 acres! 40 acres just for parking.

In your first blog entry on this topic, from about a week ago, you wrote “I’m not sure exactly how many acres SJSU was going to hand over to Wolff for the stadium and the parking and the practice fields. It might not have been all 63. Let’s say it was 40.”

What’s even much more damning is a Spartan Daily article quotes Kassing as saying it’s 40 acres:

“I don’t know if it’s going to come together,” Kassing said. “I say that not to be pessimistic, but I don’t know. It would consume 40 acres approximately, so we would provide a parcel of land – they put a commercial activity on that land and then make money.

You don’t know the details of the negotations, e.g. the acreage involved (you admit you’re not sure), the nature of the revenue sharing, etc. How can this be evaluated fairly unless the terms of a private negotation are made public and really known vs. speculation to support your argument. I’d love to hear the other side of the story. from the other side of the table, but I don’t think Earthquakes LLC is going to get involved in trying to debate the nature of a private negotation in the press. They are going to take the high road and proceed with their business.

But it really bothers me to see someone carry on with a campaign of speculation and misinformation in the press in order to forward their agenda. There are laws to prevent this sort of thing.

SierraSpartan

Shorter JazzyJ: “How DARE you speak against Soccer? You must kowtow before Soccer, lest you PAY THE PENALTY!”

Geesh. “There are laws to prevent this sort of thing”? What’re ya gonna do, JazzyJ, call the newspaper cops on Wilner or something? File suit in U.S. District Court to compel SJSU to accept the deal based on fradulent reporting by two different reporters?

The deal failed. Get over it.

JazzyJ

SierraSpartan, there’s nothing I can do really. I’m just frustrated by the one-sided, inconsistent, and slanted reporting. I think I’ve made some legitimate points here to represent an alternate view. Maybe it was a waste of time but I felt like I had to do it. I’ll get over it when I get over it, not when someone else tells me to. But thanks for the offering to schedule my emotions for me.

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